Torrent Pharmaceuticals Ltd. V. Assistant Commissioner of Income Tax, Circle - 8

TAXAP/2037/2010

AI Insights

The case revolves around the interpretation of Section 80HHC of the Income Tax Act concerning the deduction of interest income. Torrent Pharmaceuticals Ltd., the appellant, contested the ITAT's decision which disallowed the deduction of interest income claimed under Section 80HHC. The ITAT had ruled that the gross interest income should be excluded from the eligible business profits for the deduction, contrary to the appellant's claim of netting off the interest income against interest expenditure. The High Court's decision reversed the ITAT's ruling, following the Supreme Court's precedent that net interest income should be considered for the deduction under Section 80HHC.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 793920 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 03-12-2013
• Assessment Year: misc
• Other Referred Cases: ACG Associated Capsules PVT. LTD Vs. Commissioner of Income-Tax, Commissioner of Income-Tax Vs. Shri Ram Honda Power Equip
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: PAURAMI SHETH
• Assessee Lawyers: S N SOPARKAR; SWATI SOPARKAR
• Keywords: Business Profit; Deduction; Gross interest; Income Tax; Interest income; Net Interest
• Section: 143(1); 80HHC

Judgement Text

"O/TAXAP/2037/2010 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 2037 of 2010 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE R.P.DHOLARIA ====================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ====================================== TORRENT PHARMACEUTICALS LTD....Appellant(s) Versus ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE - 8....Opponent(s) ====================================== Appearance: MR SN SO PARKAR for the Appellant(s) No. 1 MRS SWATI SOPARKAR, ADVOCATE for the Appellant(s) No. 1 MS PAURAMI B SHETH, ADVOCATE for the Opponent(s) No. 1 ====================================== CORAM: HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE R.P.DHOLARIA Date : 03/12/2013 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE M.R. SHAH) Page 1 of 4 O/TAXAP/2037/2010 JUDGMENT 1. Being aggrieved and dissatisfied with the impugned judgment and order passed by the Income Tax Appellate Tribunal (hereinafter referred to as ‘ITAT’) dated 21/05/2010 in ITA No. 1347/AHD/2007 for the Assessment Year 2003-04, the assessee has preferred the present Tax Appeal for consideration of the following substantial question of law; “Whether, in the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in law in reducing eligible business profit, while granting deduction under Section 80HHC, by gross interest income of Rs.2,77,73,000/- as against net interest?” 2. The assessee filed the return of income for the Assessment Year 2003-04 declaring the total income at Rs.53,80,40,217/-. The same was processed under Section 143(1) of the Income Tax Act. The assessee claimed the deduction under Section 80HHC in respect of the interest income. While passing the assessment order, the Assessing Officer disallowed the said deduction. Being aggrieved and dissatisfied with the assessment order, the assessee preferred appeal before the CIT(A) and the CIT(A) deleted the disallowance under Section 80HHC in respect of the interest income in question. 3 On appeal before the ITAT by the revenue, by impugned judgment and order, ITAT has allowed the appeal preferred by the revenue and has held that the assessee cannot claim any deduction under Section 80HHC of the Income Tax Act in respect of interest income, which does not form part of the business income and, therefore, held that the CIT(A) was not Page 2 of 4 O/TAXAP/2037/2010 JUDGMENT justified in netting off of such interest income against the interest expenditure and holding that 90% of the net interest income is to be excluded for the purpose of computing deduction under Section 80HHC of the Income Tax Act. 4. Being aggrieved and dissatisfied with the impugned judgment and order passed by the ITAT, the assessee has preferred the present Tax Appeal for consideration of the aforesaid substantial question of law. 5. Shri S.N. Soparkar, learned Counsel appearing on behalf of the appellant has submitted that as such the issue involved in the present Tax Appeal is now not res integra in view of the decision of the Hon’ble Supreme Court in the case of ACG Associated Capsules PVT. LTD Vs. Commissioner of Income-Tax reported in [2012] 343 ITR 89 (SC). 5.1. It is submitted that in the aforesaid decision the Hon’ble Supreme Court has held that for the purpose of deduction under Section 80HHC of the Income Tax Act the net interest income is to be excluded. It is submitted that in the present case, the ITAT has taken a view that for the purpose of deduction under Section 80HHC of the Income Tax Act gross interest is to be excluded and, therefore, it is requested to answer the question raised in favour of the assessee. 6. Ms. Paurami Sheth, learned Counsel has appeared on behalf of the revenue. She is not in a position to dispute the above and is not in a position to show and/or point out any contrary decision. Page 3 of 4 O/TAXAP/2037/2010 JUDGMENT 7. Having heard Shri S.N. Soparkar, learned Counsel appearing on behalf of the assessee and Ms. Paurami Sheth, learned Counsel appearing on behalf of the revenue and the question posed for consideration by us reproduced hereinabove and considering the decision of the Delhi High Court in the case of Commissioner of Income-Tax Vs. Shri Ram Honda Power Equip reported in [2007] 289 ITR 475 (Delhi), which has been approved by Hon’ble the Supreme Court in the case of ACG Associated Capsules PVT. LTD (Supra), the question, which is raised is to be answered in favour of the assessee. In the case of ACG Associated Capsules PVT. LTD (Supra) it is held by Hon’ble the Supreme Court that for the purpose of deduction under Section 80HHC of the Income Tax Act net interest is to be excluded. In the present case, while passing the impugned judgment and order, the ITAT has held that for the purpose of claiming deduction under Section 80HHC of the Income Tax Act, the gross interest is to be excluded. The aforesaid cannot be sustained in view of the decision of the Hon’ble Supreme Court in the case of ACG Associated Capsules PVT. LTD (Supra). 8. In view of the above, the present Tax Appeal is held in favour of the assessee and consequently, the impugned judgment and order passed by the ITAT is hereby quashed and set aside. Hence, the present Tax Appeal is allowed. No costs. (M.R.SHAH, J.) (R.P.DHOLARIA,J.) Siji Page 4 of 4 "